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Indian IT: Outsourcing To Decline?

In a piece published Friday in Forbes, Sramana Mitra documented the numerical reasons why India’s outsourcing industry - commanded by corporations like Infosys and Wipro - is bound to decline. And maybe even die, if the current hiring binge, the steady increase in industry wages, and the demand for any and all services supplied by the workforce on the subcontinent from around the world decreases as a result of increasing costs and nominally increasing productivity.

I’d like to rebut Mitra’s assertions with two main points.

First, it’s fairly common-sensical to determine that the Indian IT sector, in all its phone-support-heavy, code-producing glory, will not continue to grow at the rate it is. Market saturation will inevitably occur, and the ascent in wages will diminish in speed because such an industrial limit will have been reached. Yes, Indians, given the opportunity, will seek better jobs and better salaries (as we all generally do), and thus have been flooding the IT trade to get in on the action. But there are only so many seats at the table - despite the fact that the table is expanding in size at a brisk clip. So there’s reason to forecast a period at which Indian IT will plateau, figuratively speaking. And that moment will likely be reached in tandem with the leveling-off of demand for various services.

Furthermore, it’s necessary to consider the larger, fuller picture of the evolving Indian IT world, which, according to data shown in this Mashable piece published last month, is seeing a marked rise in venture capital investments. In 2007 alone, India saw nearly $1bn in financing. This essentially means growth for Indian IT, whether infrastructural or specific to Web startups, is gradually being driven by businesses that are built to cater largely to the homeland. Self-sustainment is on the rise.

Will the slow-down in the outsourcing industry transition seamlessly into the rise of India-to-India business? Hardly. It’ll be a rough shift, for sure. The market comprised of tech giants like Infosys and Wipro will not experience a leisurely move into middle and old age. But might things work out okay in the end? It’s not out of the realm of possibility. It would be quite unlikely to find India exhaust itself of this IT boom its endured for so many years already. India still has a long way to go before the fuel supply isn’t enough to sustain the fire, so to speak.

In all, I imagine outsourcing will not go away for a good number more years. It has numerous benefits for many corporations placed elsewhere. We should count on all excess weight in the outsourcing sector to be moved into other areas, absolutely. There’s no question that outsourcing will peak. Whether it will chart a significant decline in the short term, however, is something I happen to remain very skeptical about.

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